Wednesday, January 9, 2008

Citi Sees Terminal Decline to Bank's Business Model

Here’s a snap from a Citi research note looking at the strained condition of all things financial. In a 70-page tome entitled “Testing Times,” the bank’s chief IB watcher in Europe, Jeremy Sigee, makes a convincing case for sector-wide capitulation.

Investment banking business models are, of course, being put to the test. While hedge funds and private equity are still attracting inflows, and emerging markets are still riding high, proprietary risk taking and product innovation are being scaled back. So, having already been bearish on fixed income revenues, which are forecast to fall back to 2004/5 levels this year, the Citi team now see revenues from equities and advisory work falling by 10 and 20 per cent, respectively.

But what’s really got Sigee questioning his very employment is the collapse of securitisation and structured credit.